We accept credit/debit cards
Digital Company Formation

Madeira (Portugal)

Tax Mitigation Jurisdictions

Synopsis:

Portugal occupies an area of 89,000 square kilometers (34,363 square miles) on the western edge of the Iberian Peninsula. It is bordered by Spain to its north and east and by the Atlantic Ocean to its south and west. It also includes the two archipelagos of Madeira and the Azores, situated in the Atlantic 1,050 kilometers (650 miles) southwest and 1,400 kilometers (870 miles) west, respectively, of the mainland. Portugal has a population of 10 million, of which some 400,000 live in Madeira.

Star Ratings

Corporate registration efficiency:
Cost:
Confidentiality:
Local banking facilities:
Legal system:
Political stability:
Reputation:

Tax Planning Credentials

The European Commission approved the extension of Madeira's preferential tax regime until the year 2020 for operations within the Madeira Free Trade Zone (ZFM). As such, new companies licensed as of this year and until the end of 2013 will enjoy reduced corporate tax rates of 3% between 2007 and 2009, 4% between 2010 and 2012 and 5% between 2013 and 2020, in addition to various others tax benefits.

Companies licensed to operate within Madeira's International Business Centre before the year 2001 will continue to benefit from a full exemption from corporate tax until the end of 2011. As of 2012, such companies will fall under the new regime now approved by the EU and which shall be valid until the year 2020.

The ZFM comprises an industrial free zone, an international services centre and an international shipping register (MAR). New companies licensed to carry on business there between 1 January 2007 and 31 December 2013 will benefit from a reduced tax rate of 3% in 2007-2009, 4% in 2010-2012 and 5% in 2013-2020.
Access to the scheme will be restricted to companies, which meet specific eligibility criteria, based on the number of permanent jobs created. The tax benefits will be limited by a ceiling placed on the taxable base per company which ranges from €2 million (where less than three new jobs are created) to €150 million (where more than 100 new jobs are created). The companies involved will have to start business within a fixed time limit (six months in the case of international services and one year in the case of industrial or shipping activities), beyond which they will lose their licenses.

Admission to the ZFM is also restricted to the activities included in a list drawn up by the Portuguese authorities on the basis of the statistical classification of economic activities in the EU. As under the previous scheme, authorized by the Commission on 11th December 2002 (see IP/02/1849), financial and insurance intermediary activities, financial and insurance auxiliary activities and "intra-group services" (co-ordination, accounting and distribution centres) are explicitly excluded

Companies

At an incorporation level, there is no distinction between a Portuguese company established on the mainland or in Madeira. The only difference is that a company conducting business on the Island of Madeira may avail of local tax incentives. To do otherwise, as inferred above, could affect the claim that a mere tax exemption is being afforded and not a new legal structure. Therefore, the two main non-fiscally transparent Portuguese companies are as follows:
(i) SOCIEDAD ANONIMAS (SA): This is the equivalent to a British PLC company and may, as with the British company, be publicly listed. The minimum paid up capital is €30,000.00 and such companies can benefit from bearer shares. Of course, should such a company actually wish to become listed there will be additional rules and regulations to satisfy
(ii) SOCIEDAD POR QUOTAS (LDA): This is similar in concept to the British private limited liability company and almost the same as a Spanish SRL. This entity is the most likely to be used in Madeira and requires that a minimum paid-up capital of €5,000.00 be issued. Unlike an SA, an LDA cannot issue bearer shares

Detailed Structures and Benefits

  1. Manufacturing Companies in the Free Trade Zone, if registered before 2001, receive exemption from income tax and capital gains tax, except in respect of transactions carried out in mainland Portugal, or with Portuguese residents. These exemptions apply until 2011, and an extension is not unlikely. Under the Tax Reform Act of 2000, which was finally approved by the EU in late 2002, companies, which register under the new regime, are able to enjoy a reduced rate of tax of 3% in 2007-2011 (instead of the normal rate, currently 22.5%). Non-exempt Portuguese transactions are taxed at normal rates under the Corporate Tax Code
  2. Service or Financial Companies in the International Services Centre and the Offshore Financial Centre, including offshore banks and insurance companies, can also be constituted as Private Limited Liability Companies or as Stock Companies. Such institutions licensed before 2001 receive tax exemption until 2011 on revenues derived from other companies within the various sectors of the International Business Centre (ie manufacturing, services etc), and on revenue derived from non-residents on Portuguese territory. However, the regime approved by the EU in late 2002 does not allow for new formations of financial services companies
  3. VAT applies in Madeira at the rate of 15% as from 1st July 2005 (19% in Portugal)
  4. Shipping Companies registered with the MAR Division of the ZFM will benefit from the new fiscal regime plus the low VAT rate of 15%. The Starting my Business has its own office in Funchal and can register such companies quickly and efficiently

Double Taxation Treaty Network

Portugal’s double taxation treaty network is not as extensive or well negotiated as comparable jurisdictions such as Ireland or the Netherlands. However, it does have particularly strong treaties with countries such as Italy, Spain and Brazil

Incorporation

All companies and foreign branches registered with the SDM in Madeira must have full management and be governed by our standard full management agreement. In the first year all companies/branches must pay an application fee of €750.00 plus a license fee of €1,500.00. Subsequently, only the license fee must be paid on the anniversary of the original registration. In addition, the capitalization requirement €5,000.00 but this can often be taken as a cost and hence offset against the initial incorporation fees

Administration Services

As with virtually all other jurisdictions that can afford double taxation treaty protection discounted or fully exempted corporate/VAT tax rates and EU directive/regulation protection, there must be full management and administration in Madeira. However, for marketing reasons it is acceptable to have a representative office elsewhere

Accountancy Services

It is a legal requirement that all companies in Madeira maintain proper and full accounts ready for submission to the fiscal authorities by the 31st May each year. In addition, such accounts must be audited when:

(a)the company is an SA
(b) the company is a SGPS, or
(c) two of the under mentioned criteria are satisfied in two consecutive years:
(i) the company has total profits of €1,000,000.00) or more per annum, or
(ii) the company has an income of €2,000,000.00) or more per annum, or
(iii) it employs an average of 50 or more people. In any case, Hibernian Trust e Management Lda, can provide full and comprehensive accountancy services at competitive rates

Tax Rate:

Reduced Corporate Tax rates between 3% and 5% plus a VAT Rate of only 15%